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Company cuts Piceance drilling

WPX Energy on Monday said it plans to operate just five drilling rigs in the Piceance Basin this year, down from 11 rigs up until late last year.

WPX, a new company created at the start of the year after Williams split off its oil and gas exploration and production business, said the cutback is the result of low natural gas prices, and it also is cutting its drilling plans in the eastern United States.

WPX is the leading local natural gas producer.

Last year, prior to the drop in prices, Williams had forecast 11 rigs operating this year in the Piceance. WPX spokeswoman Susan Alvillar said Williams cut its local rig count by three late last year. That left WPX with eight, and three more to cut under its plan.

“We’re in the same boat as every other natural gas producer. Gas prices have been low and it still costs the same amount of money to drill wells,” she said.

The U.S. Energy Information Administration last week reported that the price for natural gas at the Henry Hub in Louisiana had fallen to $2.32 per million British thermal units. It was nearly $5 at the middle of last year. A mild winter has reduced demand for gas for heating, while domestic production has been increasing.

Alvillar said the Piceance Basin continues to be “a large area of focus” for WPX. She noted it’s been able to drill an increasing number of wells per rig. In addition, she said Piceance Basin gas tends to be high in natural gas liquids such as propane and butane. Those liquids are benefiting from better pricing than natural gas.

WPX Chief Executive Officer Ralph Hill said in a news release Monday, “We’re primarily focusing on our Bakken oil and Piceance natural gas liquids properties where we have the best opportunities to generate the highest revenues and returns.”

The Bakken oil drilling is in North Dakota.

Alvillar said the budget cutbacks reflect WPX’s desire to show investors its ability to be “fiscally responsible as a new company.”

She said there aren’t any anticipated staff cutbacks with the rig reduction.